September 28, 2020

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Ontario's economy blamed for reduced transfer payments

Hey there, time traveller!
This article was published 12/11/2014 (2146 days ago), so information in it may no longer be current.

Manitoba's share of federal equalization money has shrunk dramatically over the last five years, and it's mostly Ontario's fault.

That's according to a new study released Wednesday that bolsters the province's long-standing frustration over flat federal transfer payments.

The study, done by the Frontier Centre for Public Policy and the Atlantic Institute for Market Studies (AIMS), found Manitoba's share of Ottawa's total equalization pie has shrunk more than 24 per cent since the recession. That's the biggest drop of any of the historic "have-not" provinces.

The decline isn't because Ottawa has been stingier with transfer payments, says co-researcher Ben Eisen of AIMS. In fact, federal transfers are now as high as they were in the generous 1970s. Eisen say the decline in federal equalization cash to provinces like Manitoba is caused by the economic downturn that hit Ontario in 2008 and hasn't fully let up. Ontario became a have-not province during the recent recession and consumed a huge share of federal equalization money.

Though Manitoba's equalization cash shrunk to $1.75 billion this year, health and social service transfers are supposed to inch up yearly by six and three per cent respectively to account for population growth and inflation. They did, but that increase barely covered the cuts to equalization.

Jim Hrichishen, Manitoba's deputy minister of finance, said that means major transfers have been stagnant at about $3.3 billion for the last five years. Federal transfers accounted for 26.5 per cent of the province's revenue six years ago. Now, they're at 23 per cent.

Weaning the province off equalization payments has been a frequently raised issue at the Manitoba legislature, with the Progressive Conservative Opposition often lamenting Manitoba's have-not status. Eisen says it's a laudable goal for provinces to move away from equalization payments over the long haul. The problem is the steep decline in equalization in a short period, especially at a time when provinces, including Manitoba, are struggling to tame budget deficits and growing debt.


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